Every Investor Needs To Understand This Secret, Said Veteran Trader
(Kitco News) - There is a secret to investing, which is that the biggest mistake investors make is not knowing how to properly manage risks, said Jeff Tomasulo, founder and CEO of Vespula Capital.
“One of the biggest mistakes that investors make is they trade too large,” Tomasulo told Kitco News. “It’s not about diversification or saying hey, ‘I need to be in 50 different stocks.’ What people don’t understand is when you’re diversifying yourself, you need to be in non-correlated assets.”
When stocks fall, for example, you’d want your other holdings like gold, soybeans, or oil, to be going the other direction, Tomasulo said.
On bitcoin, the financial educator said that the cryptocurrency has few similarities with gold and so investors can hold both together without having to view them as substitute assets.
“When you have small accounts, this is the problem, is that you have to make choices. My thing is, you trade small enough, you can invest in anything. You never want to have one asset or one position in your portfolio that’s going to destroy you,” Tomasulo noted.
On the economy, Tomasulo said that he would rather see another recession than market manipulation done to prevent one.
A recession is a natural part of the business cycle, and policy makers should not be artificially propping up the economy, he said.
“My view on it, and this has been my view for the last nine years, is that I don’t want a market manipulator in there. I don’t want the Fed to get as involved as they are, I want a recession to happen. I want the market cycles to come back the way market cycles should come back which is free markets. Let the market figure it out itself,” he said.